deal architect

Postmodern ERP Strategies: Rip and Replace

Another in the series of postmodern ERP Strategies. While these are excerpted from SAP Nation 2.0, the concepts can be applied to many other ERP environments.

While this is an extreme move, many midsized companies especially those being spun off or being taken over by private equity investors often look at that "life event" as an opportunity to replace SAP products. In SAP Nation, for example, I had described Inteva's move to Plex upon its spinoff from Delphi, the large auto component supplier.

Still other SAP customers are switching to NetSuite products. Commco LLC, a distribution and light manufacturing company, RedBuilt, a commercial construction contractor, and Penguin Computing swapped out Business Suite. Brother Max, which focuses on care and feeding products for babies and toddlers, replaced SAP’s BusinessOne with NetSuite. Adminovate, an enterprise software and consulting provider in the life, health and annuities industries, replaced SAP Business ByDesign with NetSuite.

In SAP Nation, I had profiled how Middlesbrough Council in the UK was replacing SAP with Unit4. Unit4 has since told me about similar moves at U.S.-based Travel Leaders Group, a $20 billion travel management company, the German government entity Staatsbetrieb Sächsisches Immobilien- und Baumanagement and Netherlands-based CGIAR, an international consortium of nonprofit agricultural research organizations.

More excerpts over the next few days.

Postmodern ERP strategies: Tiering

Another in the series of postmodern ERP Strategies. While these are excerpted from SAP Nation 2.0, the concepts can be applied to many other ERP environments. 

In the 1980s, as AS/400s and LANs matured, many multinationals adopted two- or three-tier application strategies — a mainframe-based application for corporate, domestic subsidiaries and regional hubs, with decentralized versions, for international subsidiaries. JD Edwards (now part of Oracle), Platinum (now Epicor), Sage and other vendors were beneficiaries of such tiering strategies.

Things have evolved quite a bit since then — now companies can go with SaaS systems for smaller subsidiaries, and as a result may not even need local IT support.

Many SAP customers have adopted two-tier strategies. NetSuite and Microsoft have particularly benefited as the solution for smaller subsidiaries.

SAP's own products, Business One and Business ByDesign, also target two-tier opportunities similar to the ones described above, and often work out more economical and flexible than Business Suite in secondary locations.

More excerpts over the next few days.

Postmodern ERP strategies: Independent Support

Gartner has been talking about "postmodern ERP" for a couple of years now:

"Businesses looking to improve administration today can take advantage of lower costs, better functional fit and process flexibility offered by blending cloud applications with on-premises applications in what we now refer to as ‘postmodern ERP.’"

In SAP Nation 2.0 I expanded the definition to showcase 9 customer strategies to modernize their ERP backbone.  Over the next few days I will excerpt some of the strategies.

An increasingly common strategy is Independent Support, or Third Party Maintenance

Gartner reports it is seeing a steady increase in inquiries about cancelling maintenance agreements with ERP vendors. This is certainly a popular strategy with many SAP customers and many are seeking "third party maintenance" from providers like Rimini Street. Such independent providers promise "a higher level of service, no required upgrades and annual support fee savings of 50 percent."

Rimini says it now has over 150 SAP customers under contract, representing over $100 billion in revenues. Most customers look at independent support for cost savings. However, many customers also find attractive the 30-minute guaranteed response for urgent issues, highly personalized service from what Rimini calls a Primary Support Engineer (PSE), support for customizations at no additional charge and the ability to run the existing SAP release with a promise of 15 years with no required upgrades.

While the book focused on SAP scenarios, the same can be applied to many other ERP environments. More excerpts over the next few days.

Postmodern ERP strategies: Ring Fence

Gartner has been talking about "postmodern ERP" for a couple of years now:

"Businesses looking to improve administration today can take advantage of lower costs, better functional fit and process flexibility offered by blending cloud applications with on-premises applications in what we now refer to as ‘postmodern ERP.’"

In SAP Nation 2.0 I expanded the definition to showcase 9 customer strategies to modernize their ERP backbone.  Over the next few days I will excerpt some of the strategies.

The second is what I called “Ring Fence”

One common strategy among SAP customers is to "ring fence" back office ERP functionality with specialist solutions. This approach gives them a chance to innovate "at the edge" and learn about newer cloud and other computing models.

Examples include HP, which has ring fenced SAP with Salesforce, Workday, and other SaaS tools. HP also uses E2open for Order Promising and Response Planning, as well as deploying its Supply Chain Planning to synch components from suppliers with its contract manufacturers.

Malher, a subsidiary of Nestlé (a large SAP customer) in South America, uses Infor's supply chain and other functionality. The Commonwealth of Pennsylvania and Kellogg, the cereal company, both use Infor’s Enwisen for their HR shared services around an SAP ERP core. AkzoNobel, the global paint and coatings company, and ABB Power Technologies AB have a variety of Infor functionality surrounding SAP.

Unit4, which focuses on ERP for service industries, indicates that a wide range of its customers use their specific functionality around SAP implementations. ASML, Atos, Capgemini, HEMA and Nationale-Nederlanden are using Unit4’s Absence Management suite to manage long-term absenteeism and ensure their people quickly reintegrate into their working environments. H&M is using Unit4’s Consolidation and Financial Performance Reporting product, Kongsberg Defence & Aerospace is using its Travel and Expense Management solution, and Folksam and Mölnlycke use its Cash Flow Planning product. BASF and Achmea use its Statutory Reporting module to manage their monthly, quarterly and annual close processes.

While the book focused on SAP scenarios, the same can be applied to many other ERP environments. More excerpts over the next few days.

A new world order

I feel like I have been a hermit in SAP Nation for the last couple of years. Not exactly, have plenty of travel expenses which prove otherwise, but in the last month, I have become aware of massive global changes in the last few years that are about to accelerate.

There is the recent sight of the Indian and the Chinese premiers visiting Silicon Valley and Redmond respectively. Their priorities have changed – no longer just wooing offshored commodity IT and manufacturing, but with far more ambitious technology visions. There’s the CEO of Daimler Dieter Zetsche who recently said “We do not plan to become the Foxconn of Apple.” Too late as Foxconn has already becoming a major supplier to the Chinese electric car economy. There’s BusinessWeek talking about how the legendary German Mittelstand ‘s big threat may come from Silicon Valley, not just Chinese or other low cost manufacturing.

My trip to Singapore and an upcoming one to Dubai – each after two decades. Each shows the stunning reality of well-run urban settings. I flew into NYC JFK this week. It has been my gateway for most of my trips to over 50 countries. But this time I got to explore the Delta, Jetblue and train infrastructure there. Remarkable the evolution, and still not as dramatic as those I saw at Changi in Singapore. I got to walk across Times Square and midtown Manhattan as the city awaited the arrival of the Pope. The accents and the ethnic shops seemed way more varied than usual.

Wired magazine takes the promise of better urban settings a step further in its latest issue  

High tech materials, sensor networks, new science, and better data are all letting architects, designers, and planners work smarter and more precisely. Cities are getting more environmentally sound, more fun, and more beautiful. And just in time, because today more human beings live in cities than not.

I reconnected with a cousin who makes me look like an amateur traveler – he has been to over hundred countries. Every time I see him, I am reminded how small the world has become. 

The week, I will be at GE’s Mind+Machines event. Last year I got  to have lunch with a Chief Pilot of AirAsia. Sure this time there will other people/places on display which showcase its wind turbines, aircraft engines, locomotives and other industrial equipment which are helping different parts of the world run better.

If you don’t like change and listen to our politicians talk about Syria and Iran and you can easily feel gloomy about the world.

This blog thrives on technology enabled disruption. To me, the world feels inviting again.

The EU Regulator Puzzle

The market share of diesel cars is more than 60% in some EU countries. In comparison, they are a curiosity in the US (less than 5% market share)  So, is it fair to ask why the VW emissions scandal was not caught much earlier by a EU regulator? This story describes the role of ICCT, West Virginia U and the US EPA in the investigation.

I have watched with similar puzzlement as EU regulators have gone after US vendors like Microsoft and Intel in the last decade for anticompetitive complaints. More recently,  Sigmar Gabriel, the German Vice Chancellor and Economics Minister was quoted, “is investigating whether Germany can classify Google as a vital part of the country’s infrastructure, and thus make it subject to heavy state regulations.”

None of those vendors have had the financial impact that SAP has had on corporate customers. European regulators have, however, stayed away from SAP, even with its dominant — estimated at 50% — ERP market share in German-speaking Europe.

Here’s another anomaly – the EU has regulated European telcos around mobile roaming charges. But try calling back from there on a US carrier and you still pay obnoxious rates.

Tough to figure out who they are trying to protect – and against what. 

SAP Academy for Early Talent

Fellow Enterprise Irregular, Mark Crofton alerted me to opportunities for young professionals who may be interested in starting or building their career in Sales or Presales at SAP.

The Sales program (which Mark leads globally) is an 8 month program consisting of classroom and field sales rotation. Upon completion, graduates become quota carrying SAP executives. The Presales program is 6 months of classroom and 6 months of field rotation. They are hiring in 25 countries.

Check out details here. 

Oracle’s CEO Mark Hurd has been encouraging a similar effort to recruit younger sales talent.

Please pass along to college students and recent graduates you know would enjoy those career paths.

Barbarians at the Cloud Gate

In the last year, as I built the model for SAP Nation, I have had conversations with several cloud vendors and shared my view that outsourcers/SIs from the on-premise world are looking for new parking places for their massive workforces and infrastructures. Cloud software vendors should leverage this bounty but be careful of the baggage many of those providers may bring along.

Some of those warnings need to be amplified as Phil Wainewright writes about the Salesforce partner ecosystem

“In annual revenue terms, they generate at least three times Salesforce’s own revenues, or close to $20 billion, according to new research from IDC presented on stage at the morning’s partner keynote.”

Time for me to write “Salesforce Nation”?

No.

Let’s put things in perspective. In SAP Nation 2.0, I actually increased the estimate for the economy from $ 200 to over $ 300 billion a year. And the SAP economy has a long track record of massive overruns and failures. The number above does not include amortization/writeoff amounts.

So, the Salesforce ecosystem estimate is not that worrying. Also, unless the cloud model deteriorates dramatically, it will never approach the size of the hosting, upgrade and application management economics which plague the on-premise model.

What is more worrying is the focus on outsourcers as a brand validation and sales channel versus them as a customer delivery support extension. Too many software vendors focus on the former and not enough on the latter.

If cloud vendors do not start tracking and benchmarking success/service levels/economics the partners are delivering, in a few years I may have ammunition to write Salesforce or Workday Nation. I hope not.  

“Postmodern ERP” strategies: Multiple Hubs

Gartner has been talking about "postmodern ERP" for a couple of years now:

"Businesses looking to improve administration today can take advantage of lower costs, better functional fit and process flexibility offered by blending cloud applications with on-premises applications in what we now refer to as ‘postmodern ERP.’"

In SAP Nation 2.0 I expanded the definition to showcase 9 customer strategies to modernize their ERP backbone.  Over the next few days I will excerpt some of the strategies.

The first is what I called “Multiple Hubs”

Many airlines has designed networks where traffic moves along spokes connected to a hub at a central airport. The majors have multiple hubs around the world. Delta, as an example has hubs at Atlanta's Hartsfield; Paris' Charles de Gaulle and other airports. Many SAP customers are moving to similar architectures with hubs for product engineering/R&D, customer facing, industry specific and back office operations.

As they build a next-generation of "smart products" (with embedded sensors, software and other technology), many SAP customers are custom developing much of that product- centric hub. In some industries, even cross-licensing technology from competitors for some of the spokes is preferable to what they can buy from SAP. Similarly, in the customer-facing hub, many customers are finding that Salesforce.com, Oracle and Adobe have made significant strides compared to SAP. The same is true for industry specific processes. This is allowing them to gradually shrink the role of SAP in their overall IT investment strategy to that of limited back office support.

While the book focused on SAP scenarios, the same can be applied to many other ERP environments. More excerpts over the next few days.

Verticalization is paying off

I tend to gloss over most press releases where vendors announce new customers, but have been noticing several industry trends.

Unit4 is starting to show momentum in the N. American local government market – several recent wins. It mirrors their UK and European successes in that sector. NetSuite continues to do well in retail/omni-channel deals. Plex continues to do well in multi-plant manufacturing companies – they start small but then expand well across geographies. Infor’s CloudSuites for a wide range of micro-verticals are giving them a fighting chance in several industries.

I don’t expect anything like the deep industrial expertise I expect to see at GE’s Mind+Machines annual event next week, but I hope enterprise vendors continue to sharpen their industry offerings. Too many general ledgers, basic HCM and other horizontal offerings are competing for attention while customers keep clamoring for verticalized offerings.

In that light, I am especially looking forward to learning more of Workday’s industry initiatives at its Rising event also next week.